States Ready to Wield Drug-Purchasing Power

Published December 1, 2001

Several states have banded together to form a multistage drug-purchasing pool to negotiate cheaper prescription drug prices for residents covered by government health insurance plans.

Louisiana, Mississippi, Missouri, New Mexico, South Carolina, and West Virginia have issued a request for proposals to hire a pharmacy benefits manager for their purchasing pool. Pharmacy benefit managers set up and maintain drug formularies, process pharmacy claims, and collect and report data. The state of Maryland is not listed on the request but has helped the other states with the project.

The participating states are seeking to collectively provide prescription drug savings for more than 1.4 million people, according to West Virginia Governor Bob Wise. “As I have learned through my years in Congress, if you have states that are willing to join together, more people will listen to what you have to say,” he says.

Proposals are due December 10, 2001, and a benefits manager is expected to be selected by March 2002, according to Tom Sussman, director of West Virginia’s Public Employees Insurance Agency. Participating states may then decide if they want to join the pool or stay with their current benefit managers. If they do decide to join the pool, they will contract individually with the chosen benefits manager.

Prescription drug costs have risen 20 percent or more during the past few years, according to the 2001 “Towers Perrin Health Care Costs Survey.” The survey shows that skyrocketing prescription drug costs are to blame for the 13 percent hike in large employers’ 2001 health benefit plans.

Eight states in the northeast are contemplating the formation of a similar drug- buying coalition. In July, politicians from Connecticut, Maine, Massachusetts, New Hampshire, New York, Pennsylvania, Rhode Island, and Vermont voted to push legislation in their states to form a drug-purchasing pool that will cover state employees and Medicaid recipients.

Vicki Lankarge is a health reporter of, the Consumer Insurance Guide.